Aug. 23 (Bloomberg) -- Dewey & LeBoeuf LLP, the defunct law
firm, collected $20.6 million in accounts receivable in July,
bringing the total to $39.9 million since the bankruptcy began
on May 28.

The firm spent $4.3 million in July, bringing net
recoveries in the month to $16.3 million, according to an
operating report filed Aug. 21 with the U.S. Bankruptcy Court in
New York.

Given net collections and $23.6 million already on hand,
Dewey was able to pay $25.7 million to the secured lender
JPMorgan Chase Bank NA during July.

The operating report doesn’t lay out unbilled fees or
accounts receivable. The balance sheet shows a receivable of
$16.4 million representing disbursements and expenses incurred
for clients.

Dewey has two official committees, one for unsecured
creditors and the other for former partners. The firm once had
1,300 lawyers before liquidation began under Chapter 11 in May.

There was secured debt of about $225 million and accounts
receivable of $217.4 million at the outset of bankruptcy, the
firm said. The petition listed assets of $193 million and
liabilities of $245.4 million as of April 30.

The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).

Oracle Must Face Suit Over Ellison Firm Buyout, Judge Rules

The Oracle shareholders have raised legitimate questions
about the company’s 2011 purchase of Pillar, a closely held
provider of data-storage systems, and can proceed with their
lawsuit against the board, Delaware Chancery Judge Leo Strine in
Wilmington ruled yesterday. Ellison, Redwood City, California-based Oracle’s founder, owns a 55 percent stake in Pillar.

The investors properly raised questions about whether the
purchase “was a legitimate deal and whether somebody could have
gotten a better deal” for them, Strine said at a hearing.

Oracle, the world’s largest maker of database software,
bought San Jose, California-based Pillar in June 2011 in a deal
that required no compensation up-front and allowed for an
“earn-out” payment based on Pillar’s performance during the
next three years, according to a filing with the U.S. Securities
and Exchange Commission.

Under the deal’s terms, the 68-year-old Oracle CEO’s
$544 million investment in the data-storage startup was
converted into preferred Pillar shares.

Those shares were canceled after the transaction closed in
exchange for rights to receive a portion of the earn-out payment
that may be made in 2014, the investors said in court filings
earlier this year.

The investors, pension funds in Michigan and Pennsylvania
that own Oracle shares, sued in Delaware last year challenging
the decision to acquire Pillar. They filed so-called derivative
suits against the board, which would return any recovery from
insurance covering the company’s officers and directors to
Oracle’s coffers.

The investors contend in court papers that Oracle directors
improperly used company resources to “bail out” Ellison from
his “horrible investment” in Pillar.

“Ellison got Oracle to agree to take over Ellison’s
investment, fund Pillar Data for the next three years, and pay
for that privilege by valuing Pillar Data at a point three years
down the road,” the investors said in a April 27 filing. “In
short, the transaction made no economic sense for Oracle. But it
made a lot of sense for Ellison.”

Oracle’s directors, who include Ellison, said that the deal
was structured in a way that required no immediate payment for
Pillar to insure Ellison didn’t improperly benefit from the
acquisition. The so-called earn-out payment only will be made if
Pillar’s performance over a three-year period warrants it, they
said.

At this stage in the transaction, “Oracle has paid
nothing,” Michael Carroll, a New York-based lawyer for the
software maker, told the judge yesterday. Investors shouldn’t be
able to challenge the deal until it’s clear the earn-out payment
will be made, Carroll, a partner at Davis Polk & Wardwell LLP,
added.

Still, Oracle officials will have to spend money to cover
Pillar’s operating expenses over the three years, and that
damages investors, Stuart Grant, a lawyer for the Oracle
shareholders, told Strine. Grant is a partner at Wilmington-based Grant & Eisenhofer PA.

The case is City of Roseville Employees’ Retirement System
v. Ellison, CA6900, Delaware Chancery Court (Wilmington).

Madoff Trustee’s Customer Payment May Reach $2.4 Billion

The trustee liquidating Bernard L. Madoff’s bankrupt
brokerage won court approval to make a second customer payment
that may reach $2.4 billion, or seven times as much as the con
man’s investors have received so far.

U.S. Bankruptcy Judge Burton Lifland in New York yesterday
granted Irving Picard’s request to hold back less money from a
fund created to compensate investors for Ponzi scheme losses.
Some customers have demanded 9 percent interest on their money.
Lifland’s ruling that Picard can reserve just 3 percent for
interest means the payment to customers may be $1 billion larger
than if he had to hold back the bigger amount, Picard has
calculated.

Court challenges have tied up most of the $9.1 billion that
Picard has raised since Madoff’s 2008 arrest, mostly through
settlements. Picard has paid customers $336 million from the
compensation fund, according to his website. His law firm, Baker
& Hostetler LLP, meanwhile, has charged more than $300 million
for liquidating Madoff’s brokerage.

Empire State Building IPO Challenged by Legacy Investors

Al Weiner’s stake in New York’s Empire State Building came
to him by way of his grandfather’s death in a 1950 train crash
in Richmond Hill, Queens. His grandmother sued the Long Island
Rail Road, and her lawyer was Lawrence Wien, a family friend.

The money from the settlement made the Weiners a natural
call when Wien was reaching out to his network of friends and
business associates in the early 1960s to buy what was then the
world’s tallest skyscraper. The family and more than 2,000
others purchased shares of the Empire State Building under a
syndication orchestrated by the lawyer and his partner, real
estate investor Harry Helmsley.

Half a century later, that complex ownership structure may
stand between Wien’s successors, Peter Malkin and his son
Anthony, and their plans to form a real estate investment trust
and take the Empire State Building public. The Malkins, who need
80 percent approval from the 3,300 units held by the legacy
investors, are facing opposition by stakeholders like Weiner,
who say they will be shortchanged in the deal and lose a steady
income stream that is poised to jump in value, sacrificing
safety for the vacillations of the stock market.

“My grandma said don’t ever sell these,” said Weiner, 53,
who runs a business out of Jericho, New York, that sells
artisanal cheeses to restaurants. “The checks come in like
clockwork.”

As Bloomberg’s David Levitt reports, Peter and Anthony
Malkin, Wien’s son-in-law and grandson, respectively, have taken
notice. The entity they control, Malkin Holdings LLC, has filed
four documents with the Securities and Exchange Commission in
the last month disclosing efforts to reach out to stakeholders
and saying that the dissident holders’ conclusions can’t be
relied upon.

“We believe certain individuals are creating an
environment of confusion through incorrect statements about”
their company and the proposed transaction, the Malkins wrote in
an Aug. 6 letter to investors. Distributions probably will
increase more over time as part of the deal than if the Empire
State Building was left as a standalone investment, they said.

The Malkins declined to comment for this story because of
the quiet period for pending IPOs.

They are aiming to form the REIT, to be known as Empire
State Realty Trust Inc., to gain greater efficiencies and access
to capital, and because the Helmsley estate is liquidating its
holdings following the death of Harry Helmsley’s wife, Leona. In
addition to the 102-story tower, the REIT would include 18 other
properties, ranging from midtown Manhattan office buildings to a
development site in Stamford, Connecticut, that would be added
to the legacy investors’ holdings.

The Malkins’ valuation firm, Duff & Phelps Corp., estimates
the value of the entities that hold all the buildings to be
included in the REIT at $3.99 billion. About $2.5 billion is
from the Empire State Building.

The share sale stands to be the highest-profile REIT IPO
since the 1990s, when big office landlords such as Boston
Properties Inc. and SL Green Realty Corp. went public, said
Lawrence Longua, director of the REIT Center at New York
University’s Schack Institute of Real Estate.

Small investors such as Weiner own stakes in an entity
called Empire State Building Associates LLC, which holds the
deed to the Empire State Building. The investors are entitled to
about half of the tower’s value -- one of the points of
contention -- because the other half is assigned to the
building’s sublease holder, according to an evaluation by Duff &
Phelps.

The firm’s appraisal of the Empire State Building at $2.5
billion indicates that each of the 3,300 units, priced at
$10,000 in 1960, would be worth about $330,000 today.

The small investors may lose close to half that amount
after taxes should they take shares of the REIT, and then would
have trouble finding an alternative place for their money that
offers the same dependable returns, said Richard Edelman, a
grandson of an original investor who receives payments as part
of a trust. The Malkins have come up with an alternative to
address the tax implications.

Another group of investors has sued, alleging “an
imbalance and disparity of knowledge and economic power”
between the Malkin and Helmsley interests and the small
investors. Five separate lawsuits were consolidated into a
single class action on June 27 in New York State Supreme Court
in Manhattan. The lawsuit is “baseless,” Hugh Burns, a Malkin
Holdings spokesman, said in an e-mail.

“I’ve been in other IPOs where there’s litigation and
there’s incredible pressure to resolve it, because you can’t
take a company public with that kind of overhang,” said Boris
Dolgonos, a partner in the New York office of the law firm Jones
Day, who has worked on several share sales and isn’t involved in
the Empire State Building IPO. “Whenever there’s any kind of
dissent or litigation the sponsor wants to have that resolved
before taking it public.”

The class action is Leon Meyers v. Empire State Realty
Trust Inc., 650607/2012, New York state Supreme Court
(Manhattan).

For more, click here.

Moves

Former WellCare Executive Rejoins King & Spalding in Washington

John C. Richter, who had been the deputy general counsel at
WellCare Health Plans Inc., is rejoining King & Spalding LLP as
a partner in its special matters and government investigations
practice in Washington on Sept. 4.

According to a statement from the firm, Richter will focus
primarily on health-care investigations and cases involving
whistle-blower cases.

Richter worked at WellCare for two years, supervising
litigation, internal investigations and business contracting.

King & Spalding has 800 lawyers worldwide.

Tax Lawyers Join Crowell & Moring in Washington Office

Crowell & Moring LLP has expanded its tax practice with the
addition of two partners in the firm’s Washington office.

Donald M. Griswold and Walter Nagel are moving their
practices from Reed Smith LLP to Crowell & Moring, where they
will provide counseling to Fortune 500 clients on state and
local tax matters, including mergers and acquisitions, state tax
planning, and audit defense and litigation. Griswold and Nagel
will also be joined by an associate.

Griswold and Nagel are both on the adjunct faculty of
Georgetown University Law Center. Two other tax attorneys, David
B. Blair and David J. Fischer, joined the firm last month.